Fiscal policy
A Foundation for Inclusive Development and Economic Stability
Fiscal policy—the management of government revenue and expenditure—is a cornerstone of economic stability and social progress in the Global South. These decisions shape how countries respond to crises, support vulnerable populations, and invest in long-term growth.
From financing social protection in times of crisis to mobilising domestic revenue and supporting industrialisation, fiscal choices have direct consequences for poverty reduction, employment, and economic resilience.
PEP’s research shows that effective fiscal policy must be grounded in country-specific economic structures and social realities. By supporting locally-led analysis, PEP helps ensure that fiscal reforms are targeted and sustainable.
What PEP Research Tells Us About Fiscal Policy
Targeted interventions deliver stronger results
Broad fiscal measures are often less effective than targeted approaches. Combining public investment with interventions such as wage subsidies for women and youth can boost employment and equity.
Fiscal policy is central to crisis response
Well-designed fiscal measures—such as social protection, tax relief, and temporary subsidies—can protect households, reduce poverty, and support economic recovery during shocks, like the Covid-19 Pandemic.
Local engagement mobilises domestic revenue
Property tax systems remain underutilised in many countries. However, compliance improves when tax systems are transparent, locally administered, and supported by community engagement.
Complementary policies amplify impact
Fiscal measures are most effective when combined with structural interventions. For examples, investments in rural electrification in Nigeria deliver greater economic growth and gender equality when paired with policies that boost productivity.
Fiscal buffers strengthen economic stability
In resource-dependent economies, stabilisation funds and prudent public spending help manage revenue volatility and protect long-term development investments.
From Evidence to Policy Action
PEP’s research provides a clear pathway for policymakers to move beyond short-term responses toward strategic fiscal planning.
Findings show that targeted social spending can reduce poverty without undermining fiscal sustainability, while well-designed tax systems can support industrialisation and employment. At the same time, strengthening domestic revenue systems—through improved compliance and local engagement—can increase fiscal space without requiring major institutional overhauls.
At the macroeconomic level, PEP’s work supports governments to assess trade-offs between taxation, public investment, and employment, enabling more effective and inclusive economic planning.
Fiscal Evidence in Action
- Argentina
Emergency income support programmes prevented large-scale poverty increases during the COVID-19 crisis.
- Ghana
Temporary exemptions on water and electricity tariffs helped reduce household vulnerability and support recovery.
- South Africa and Senegal
Targeted fiscal policies, including support for women and youth employment, proved more effective than broad measures in addressing labour market inequalities.
Fiscal Policy initiatives
Explore the full list of PEP projects, publications and researchers relevant to the theme of Fiscal Policy below.
Projects
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Researchers
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Working Papers
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Policy Briefs
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